An American Airlines plane and a US Airways plane are parked at Washington's Ronald Reagan National Airport on Aug. 13. / Susan Walsh, AP

by Bart Jansen, USA TODAY

by Bart Jansen, USA TODAY

WASHINGTON - The Justice Department announced Tuesday it is settling its lawsuit against the merger of American Airlines and US Airways by requiring the combined airline to give up slots at key airports across the country to low-cost competitors.

The department filed papers in U.S. District Court in the District of Columbia to announce the settlement that will avoid a trial scheduled to start Nov. 25.

The settlement clears the way for American and US Airways to become the world's largest airline, nearly two years after American filed its bankruptcy case to reorganize.

"This agreement has the potential to shift the landscape of the airline industry," Attorney General Eric Holder said. "By guaranteeing a bigger foothold for low-cost carriers at key U.S. airports, this settlement ensures airline passengers will see more competition on non-

stop and connecting routes throughout the country."

"This is very good news and we are grateful to all who have made it happen," said Doug Parker, CEO of US Airways, and incoming CEO of the combined airline, which will be based in Dallas/Fort Worth and go by American. "We are pleased to have this lawsuit behind us and look forward to building the new American Airlines together."

Under the terms of the settlement, the airlines will divest 52 slot pairs at Reagan and 17 slot pairs at LaGuardia. The airlines will also surrender two gates each at Boston's Logan airport, O'Hare, Dallas Love Field, Los Angeles and Miami.

Bill Baer, the assistant attorney general for the antitrust division, told reporters Tuesday that the Justice Department was confident in its case, but that the settlement would boost competition by forcing the combined airline to give up slots at competitive airports.

Baer cited Southwest's gain of slots at Newark, following the United merger with Continental, and JetBlue's gain at Reagan, for lowering airfares and boosting competition. Baer said the number of slots the combined American will give up at seven airports will be the most in merger history.

"It provides more competition than exists today in this industry," Baer said. "That is good news for consumers all across the country who will benefit from more choices and more competitive airfares."

After completion of the required divestitures, the combined company expects to operate 44 fewer daily departures at Reagan and 12 fewer daily departures at LaGuardia than the approximately 290 daily DCA departures and 175 daily LGA departures that American and US Airways operate today.

Parker said the combined airline must still decide which destinations to drop because of the lost slots at Reagan and LaGuardia. But he said they would be announced with enough time for the airlines that acquire the slots to decide whether to continue serving those communities.

"We do indeed serve some communities that it is unlikely will be served by those that pick up these slots," Parker said.

Tom Horton, CEO of American, said the loss of slots is relatively modest, totaling about 15% of the combined airlines' slots at Reagan and 7% at LaGuardia.

But the airlines said the changes wouldn't reduce total employment at the new company.

"This is an important day for our customers, our people and our financial stakeholders," Horton said. "This agreement allows us to take the final steps in creating the new American Airlines."

The companies now expect to complete the merger in December. Completion of the merger remains subject to the approval of the settlements by the U.S. Bankruptcy Court.

To maintain its service to small and medium-size airports that US Airways warned might suffer from a reduction in slots at Reagan and LaGuardia, the combined company announced plans to use its gates at Reagan to serve those communities.

Another part of the settlement also committed the combined American to maintain its hubs in Charlotte, New York's JFK, Los Angeles, Miami, Chicago O'Hare, Philadelphia and Phoenix. For a period of five years, the merged company will continue daily service from those hubs to each of the states participating in the lawsuit: Arizona, Florida, Pennsylvania, Michigan, Tennessee and Virginia.

Delta Air Lines issued a statement welcoming the agreement and saying the airline "looks forward to the opportunity to acquire slots that will be divested under the agreement, particularly at Washington-Reagan National Airport." Delta said it is the airline best positioned to continue competitive non-stop flights from Reagan to small and midsize cities that could otherwise see service reduced or eliminated.